Posted by: pizzainmotion | April 11, 2013

Pizza In The News: The New York Times Is A Bit Skeptical About The American and US Airways Merger

Maybe you haven’t heard, but American Airlines and US Airways are planning on merging into one carrier that would become the largest of the legacy US carriers (alongside a similarly sized Delta and United).  It’s been a long road, and along the way I’ve been skeptical this would lead to a better airline overall.

The New York Times decided they wanted to dig a bit deeper on those concerns, and The Getaway columnist Stephanie Rosenbloom (if you don’t read her column now, you need to) has asked the tough questions a lot of frequent travelers want to ask.

After getting some of the answers from CEO-to-be of the joint airline Doug Parker, Stephanie turned to some frequent travelers, yours truly included, for a frequent traveler BS detector of sorts on the answers.

When asked if the merger would negatively impact the ability of frequent travelers to score that first class upgrade, his answer was, “No.”  Maybe it’s just me, but I’d like a bit more of a detailed answer from the guy scheduled to run my favorite airline later this year.  And, I think a simple one-word answer isn’t accurate here.

“There will be upgrade seats,” said Edward Pizzarello, a founder of Milepoint.com, a leading frequent-flier forum, and an organizer of MegaDo, retreats for frequent-flier fanatics. “But will they be available to leisure travelers or bottom-tier members?”

See, here’s the issue.  Right now, American only gives unlimited free upgrades to its top-tier Executive Platinum members.  It’s one of the things I value highly about my Executive Platinum status.  Over the past 3 years and almost 400 flights on American, I’ve missed less than 5 upgrades.  Total.  US Airways (along with Delta and United) offer unlimited free upgrades to all elites.  That means it’s harder for top-tier elites to score upgrades when making last-minute changes, which they do frequently.  Under this policy with United, I missed more than 20 upgrades just in 2012.  I’m not the only one who thinks this is a likely outcome.

If that happens, upgrades will be free, though there will be more competition for them, said Gary Leff, a founder of Milepoint and the mileage-award booking serviceBookyouraward.com. “It’s almost a foregone conclusion that they wind up going with the US Airways approach,” he said.

One potential sign of comfort here is that American has more first class seats than its competition now.  US Airways does okay, though it has less than American.  As long as they don’t rip the extra seats out of the American planes anytime soon, I suspect there will be enough inventory to be better than the competition, though likely not as good as what I’ve grown accustomed to.

Not surprisingly, this next answer from Doug didn’t sit very well with me:

If the merger is completed, the nation will have three major airlines of similar size (American, United, Delta). Mr. Parker said that means they would compete more on in-flight products, like Wi-Fi, seats and food. Yet he pointed out that US Airways research shows passengers care most about basics: getting where they want to go on time (with their bags). That answer doesn’t exactly allay the concerns of American Airlines elite members who are accustomed to being fed.

Sure, I like getting to my destination on time.  I value it very highly.  But, I expect it, just like my customers expect me to deliver what I promise.  What if FedEx started delivering 20% of their packages late every day?  Not the best business model.  There’s no question that if the target of the new American is to deliver on-time flights and luggage, we’re in trouble.  That answer misses the larger point that the customer bought a ticket expecting to get there on time and have their bag delivered as well.

What they’re (or at least I’m)looking for to differentiate American from other carriers is not to be less horrible than the competition.  It’s to exceed my expectations. That’s what builds loyalty.

And, frankly, I don’t think the new American will excel in foodservice as much as the current American.

“If there’s a big fear,” Mr. Pizzarello said, “it’s that instead of my roasted chicken with a nice couscous, I’m going to get pretzels.”

Even on some regional flights, American’s elites receive food. “I don’t expect that to stay in place,” Mr. Pizzarello said.

“American Airlines is the most generous with food and US Airways is the least,” Mr. Leff said. “One worries that they sort of split the difference somewhere.”

Are the meals a deal breaker? Not for me specifically.  I love that the food quality has improved immensely on American and that they’re looking for new ways to impress me with those food choices.  For me, that’s where the loyalty comes in.  American (today) is recognizing that I might have “wants” beyond an on-time arrival, and that delivering in these areas will earn my loyalty.  I’m still skeptical the new American will do that, especially since someone from US Airways is in charge of the transition team.

American has long made efforts to cater to its elite members. “Up until now, American has made their premium product improvements a real center point of their pitch,” Mr. Leff said. But he said that the new American will have someone from US Airways helping lead the integration team. “That kind of gave me pause,” he said.

There are undoubtedly positives that will come from the merger.  The new network will make it much easier for me to stay loyal to American by giving me more choices.

Travelers will be able to get to more places from more cities on the new American, which will have more than 6,700 daily flights to 336 destinations. “The breadth of the network is awesome,” Mr. Pizzarello said.

I’d like to say I’m surprised by some of Doug Parker’s answers.  I’d also like to think that he knows people are concerned about some of these items and would make an effort to have better talking points on how the new American will be better (other than a big network and kinda sorta getting me there on time with that bag I never check).

I do think it’s pretty awesome that Stephanie sought out Gary and I for our perspective.  It is the New York Times, after all, the paper I grew up with.  I think it’s important to tell both sides of the story right now, and I think the piece does an excellent job of that.  There’s still more water to pass under the bridge before we know these answers.  And, I’m not planning to hide under my desk waiting for them.

I do think that there’s a real risk in Doug being right about one thing, and that’s the possibility the airlines will compete on in-flight products.  Because, as history has shown us with the airlines, they may just choose not to compete.  I don’t think it would be a conscious decision, but if everyone has wifi I’m not sure I would bank on the airlines to work hard to find the next innovation.  It hasn’t been something they’ve excelled at in the last 10 years.  And, while you can say they’ve gotten better at on-time arrivals, customer service, information technology and physical product are still severely lacking in areas.

I just hope the next strategic play isn’t trying to figure out how to mess up a bit less than your competition.


Responses

  1. […] Even without considering the differences between US Airways and American there are plenty of reasons to worry.  And, there are major differences in some areas between US Airways and American.  I was recently quoted in a New York Times piece that outlined some of the biggest differences. […]

  2. […] Pizza In The News: The New York Times Is A Bit Skeptical About The American and US Airways Merger […]


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